FBI Launches Probe of IRS

Treatment of Tea-Party Groups Eyed; Internal Review Blames Higher-Ups

By

John D. McKinnon and

Siobhan Hughes

Updated May 14, 2013 7:59 p.m. ET

WASHINGTON—Attorney General Eric Holder said Tuesday the Justice Department has opened a criminal probe of the Internal Revenue Service's treatment of tea-party groups, while an investigative report blamed the agency's managers for allowing the practices to continue for more than 18 months.

A report from the Inspector General says the IRS used 'inappropriate criteria' to review applications from tea party and other groups seeking to qualify as tax-exempt 'social welfare' organizations. Siobhan Hughes updates the story.

On Tuesday night, President Barack Obama termed the audit findings "intolerable and inexcusable" and said he directed Treasury Secretary Jacob Lew to hold those responsible accountable.

Attorney General Eric Holder defended the Justice Department's AP phone-records actions in a press conference Tuesday, and opened a criminal probe of recently disclosed actions by the Internal Revenue Service. Evan Perez reports on The News Hub.

Mr. Holder said Tuesday he ordered the department's probe Friday after the IRS apologized for what it said was inappropriate scrutiny of tax-exemption requests by conservative groups with "Tea Party" or "patriot" in their names.

"The FBI is coordinating with the Justice Department to see if any laws were broken in connection with those matters related to the IRS," Mr. Holder said at a news conference. "Those were, I think, as everyone can agree, if not criminal, they were certainly outrageous and unacceptable."

The report delivered to Congress Tuesday by the Treasury Inspector General for Tax Administration said beginning in 2010 "ineffective management…allowed inappropriate criteria to be developed and stay in place for more than 18 months" and resulted in substantial delays in processing certain applications, and allowed unnecessary information requests to be issued.

"The IRS must apply the law in a fair and impartial way, and its employees must act with utmost integrity," President Obama said. "This report shows that some of its employees failed that test."

He said he told Secretary Lew to make sure the inspector general's recommendations are implemented quickly.

In a separate statement, Mr. Lew said he expects the IRS to implement the recommendations without delay.

ENLARGE

Attorney General Eric Holder during a news conference at the Justice Department in Washington on May 14.
AP

The inspector general's report left unanswered a key question—how exactly IRS workers came to focus excessively on conservative groups. "We could not specifically determine who had been involved in creating the criteria" that led to selection of so many applications from conservative groups for extra review, the report said in a footnote.

The report called on the IRS to better document the reasons for choosing groups for extra review, request better guidance on rules by the Treasury Department, and quickly resolve cases—some of which "have been in process for three years." "Although the IRS has taken some action, it will need to do more," the report said.

The IRS generally agreed with the recommendations and said that "while flaws in our process were corrected last year based on our own review," it held off on publicly discussing them because the agency was awaiting the inspector general's report. "There was no intent to hide this issue," an IRS statement said.

The IRS didn't respond to a request for comment on the DOJ probe. IRS acting Commissioner Steven Miller said in an op-ed published Tuesday in USA Today that, "mistakes were made, but they were in no way due to any political or partisan motivation."

IRS officials have previously said agency workers have stopped using the inappropriate standards for scrutinizing applications and politically neutral criteria are now being used. They blame the problems on bureaucratic shortcuts.

Also on Tuesday, a House Republican said IRS officials had conducted their own internal investigation in 2012, finding a "substantial bias against conservative groups" in the agency's handling of applications for tax-exempt status. Yet IRS officials never disclosed that probe to GOP lawmakers who were asking about the handling of tea-party groups, said Rep. Darrell Issa (R., Calif.) in a letter to the IRS.

Applications selected for the heightened scrutiny essentially remained in "limbo" for up to two years, Mr. Issa said, who added that no IRS employees have been disciplined in the matter and one appears to have been promoted.

Mr. Miller met Tuesday with Senate Finance Chairman Max Baucus (D., Mont.), who plans hearings. "The senator didn't pull any punches and warned Mr. Miller that he is in for some serious questioning from the committee," said Baucus spokesman Sean Neary.

The inspector general's report said that as of Dec. 17, it had reviewed 296 applications from groups seeking tax-exempt status that had been set aside for scrutiny by a team of specialists. Of those, 108 had been approved, 28 were withdrawn by the applicant, none had been denied, and 160 were open from 206 to 1,138 calendar days.

About one-third of these applications included "Tea Party," "Patriots," or "9/12" in their names, while the remainder didn't, the report said.

The IRS told the government watchdog—headed by J. Russell George, who was nominated by President George W. Bush and confirmed by the Senate in 2004—that the fact that many applications reviewed by specialists didn't involve such conservative groups showed that it wasn't politically biased.

But the report concluded, based on a statistical sample, that all cases with "Tea Party," "Patriots," or "9/12" in their names were forwarded to the team of specialists.

Facing a storm of criticism from both Republicans and Democrats, Mr. Miller said in his op-ed that the IRS wasn't trying to target any particular group but instead was trying to deal with an influx of applications and a challenging law that limits or even bans political activity by some tax-exempt organizations, but is riddled with complexity.

The IRS has said applications from groups seeking to be treated as tax-exempt social-welfare groups under section 501(c)(4) of the tax code more than doubled from 2010 to 2012, presenting challenging legal issues. "The mistakes we made were due to the absence of a sufficient process for working the increase in cases and a lack of sensitivity to the implications of some of the decisions that were made," Mr. Miller wrote.

The influx of applications followed a 2010 Supreme Court decision that limited the government's ability to restrict many types of political donations and expenditures.

Congressional investigators say they found evidence that top IRS officials, including Mr. Miller and former Commissioner Douglas Shulman, learned separately about the problems about a year ago, yet failed to disclose them to GOP lawmakers who were questioning why tea-party groups were being scrutinized.

Mr. Holder said the Justice probe would include a review of "a variety of statutes within the IRS code" and the federal criminal code. The Internal Revenue Code prohibits the IRS's misuse or improper disclosure of taxpayer information. The federal criminal code would govern any false statements. Some federal laws also prohibit violation of civil rights.

IRS agents also could be targeted in private lawsuits by those who were subject to any improper scrutiny. Those lawsuits, called Bivens actions, raise claims of constitutional violations by federal agents and would likely make it difficult for the Justice Department to defend the IRS agents, since it also is investigating the matter.

If management decision-making is to blame, and I blame my managers, then I am also responsible.

If a crime has not been committed and I/we need to prove no culpability resides with the senior executives of our government, including me, then start an investigation which will find no crime (because none exists) and bury my responsibility behind the smoke and mirrors of the investigation.

The leftie media will then trumpet loudly the lack of a crime at the conclusion of the investigation (because none exists) and the sheep will continue to sleep, unaware the dangers they are rapidly accruing.

Gotta hand it to him, he plays the compliant-media card well, very, very well.

I'm sure it's been commented on, but:"The IRS must apply the law in a fair and impartial way, and its employees must act with utmost integrity," President Obama said. "This report shows that some of its employees failed that test."

The President speaks of the IRS as some kind of outside organization beyond his purview or control, some rogue agency that could benefit from the control that only HE can give. This is the lynchpin of a Presidency that serves to punish those that don't grant absolute control and fealty to it, It's the height of arrogance that only people who disdain the private sector can hold.

Oh, and IRS, just to clear any confusion when you start my audit, I'm the Scott Lindholm in Davenport, IA, so don't punish some other Scott Lindholm over my temerity to think differently than the President and his administration.

Get ready for a series of calibrated statements and quotes, all of which will fall just short of acknowledging what everyone already knows. The first one has already arrived: the IRS "used inappropriate criteria". In other words, they didn't really target conservative groups. They merely used faulty "criteria". It's all an innocent mistake!

The DOJ "Fast & Furious" fox will coordinate with the FBI "AP-Phones-R-Ours" fox to investigate the IRS "Ream 'Em and Rack 'Em" fox, and then report to the White House "The-You-Tube-Did-It" fox that, "there's no there there, and what does it matter anyway since whatever it is happened a long time ago, if it ever happened at all, which it didn't."

Tax exempt status is not permissible for political organizations. The real crime here is that most of these "targeted" groups are in fact political organizations, yet were still granted tax-exempt status. We are living in Jack Nicholson's Cuckoo's Nest world.

First, is the story that the IRS targeted only conservative groups. The fact that the head of the IRS is a Bush appointee argues for lack of politcal involvement on the president's part. Nevertheless, a liberal president whose "rogue agency" just happens to be investigating conservative groups doesn't pass the smell test.

But second and more important, the IRS has been too lax in its dealings with political groups. All these supposedly non-partisan groups shoveling money into commercials during the presidential should have been a red flag. There's nothing wrong with that of course; its just that groups engaged in shadow campaigns should no be granted tax-exempt status. That seems to me to be the real story. Why aren't more investigations being carried out of both liberal and conservative groups?

That's where the real poltical pressure is; to stifle investigations into political groups, both liberal and conservative.

What a surprise: the IRS employs human beings in its workforce. I'm not impressed that the Tea Party and other right wing organizations have acquired some new and special credibility simply because they now bear the cloak of martyrdom. Nothing about what the IRS did makes me feel more supportive of their positions on gun control, immigration, taxation, or anything else.

It's not as if we haven't heard of human beings abusing positions of power before. There are Congressmen and military chiefs who have molested their interns and even more who have traded on inside information and profited from their former ranks. There are CEO's and CFO's rotting in jail for looting their companies. CIA and FBI agents have sold out their country to the highest bidder. In the county where I live (near Cleveland), in the last 3 years scores of both public officials and private business people are now imprisoned as a result of a corruption probe which reached into school boards, contracting companies, the judiciary, and high local government offices. So, really, where's the surprise that human beings can do dirty deeds.

The Rs and other right wing groups could, if they decide to use some brain power in the midst of the endorphin high they are enjoying as engendered by this scandal, make this incident into a powerful argument for the abolishment of the IRS and a tax code that cannot simply be "reformed," in favor of a consumption based system where taxes are collected at the point of sale. Aside from being the most apolitical system imaginable (no political decisions need to go into calculating a sales tax), every illegal immigrant would have to pay taxes, which alone should gladden the heart of the most hardened Tea Party member.

I urge everyone on the left and the right to take a good look at "The Fair Tax" - fairtax.org . It eliminates income taxes, medicare taxes, social security taxes - and, best of all, the IRS. Everyone pays a fair share based upon what he wants to consume, and it includes a feature to neutralize the regressive nature of a flat tax.

It is a sure sign that our federal government is out of control, and has become too unyeilding, when it takes two agencies to deterimine if any laws were broken, when there has been obvious violations of our most basic rights.

Now everybody recognizes that the IRS’s treatment of tea-party groups was a bad practice.

But the statement of the IRS acting Commissioner Steven Miller that "mistakes were made, but they were in no way due to any political or partisan motivation" is the game to say the “sin” and hide the “sinner”.

Eric Holder..."Those were,I THINK, as everyone can agree, if not criminal, they were certainly outrageous and unacceptable.""I THINK"........We should all rest assured, he'll get to the bottom of this.....and those responsible, "will be held accountable." They are all thugs.

So we need to calm down and just let the justice department and Eric Holder tell us what we need to know?....or we need to calm down and just forget it and let it pass?.....how do we need to calm down?...

Mr. Linden,We could argue all day about the difference between 501(c)(3) and 501(c)(4) groups, but that misses the point. The relevant issue here is that the IRS was deliberately selecting conservative groups for "special scrutiny" that was not applied to liberal groups. The obvious purpose was to intimidate potential donors and dry up the groups' funding sources going into the election. This is an absolutely intolerable abuse of power, and if the precedent is established that the IRS can behave in this fashion then the entire political class will use the new tool against all of us and no one's liberties will be secure.

The issue becomes even more significant when viewed in light of the AP scandal. Here the DOJ cast a net far wider than necessary in order to intimidate potential whistle blowers and dry up the media's source of information. Taken together, the two scandals paint a picture of a reckless and corrupt administration that has gotten dangerously out of control. If these actions are allowed to stand without consequence then the citizenry will be largely defenseless against the government. This is how republics turn into empires.

Two things must happen if we are to avoid this fate. First, the media must finally put down their pom-poms and start acting like journalists again. Second, the Obamatons among us must put down the Kool-Aid, pay attention to what these hope-n-change miscreants are up to, and stop defending this administration's Nixonian behavior. If those things don't happen we will deserve what we get....

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